Growing Your Farm Profits Business Assessment Tool

Introduction

Growing Your Farm Profits: Planning for Business Success

The Value of Planning

Part 1 Assessing Where Your Farm is Now

Part 2 My Top Priorities

Part 3 Setting Goals

Part 4 Action Planning

Part 5 Next Steps

Business Assessment Areas

Production Management

Marketing

Financial Management

Human Resources

Social Responsibility

Succession Planning

Business Goals

Assessment Outcomes

My Top Priorities

Key Goals

Action Plan

Glossary

Production Management

Market Development

Financial Management

Human Resources

Social Responsibility

Succession Planning

Business Goals

Introduction

Growing Your Farm Profits: Planning for Business Success

Owning a farm a business in Ontario in the 21st century is a tough but rewarding way of life. Besides the changeable weather, you face rising costs, volatile markets and the threat of pests or disease. You also deal with several other pressures:

  • Buyers are looking to keep costs low
  • Consumers want inexpensive food that comes from crops grown in an environmentally friendly way and/or from animals they know are humanely treated
  • The internet has opened a whole new world of opportunity, but has also brought potential threats to the way business is done
  • Climate change is and will continue having both positive and negative effects on farm businesses and their owners’ way of life
  • Family responsibilities and community obligations need constant nurturing and attention, too

As a farmer, you probably don’t go ‘home’ at the end of a working day. Your business is your home. This sets you apart from other kinds of businesses.

You want your business to be successful now, providing a good living for you and your family. You also want to be able to sell it or pass it on as a profitable enterprise when you’re ready to move on. As much as possible, you want to manage the risks and take advantage of the opportunities that come your way.

The Growing Your Farm Profits Online Assessment Toolwill help you meet these many demands with a logical, practical plan that is flexible enough to fit your needs. It will guide you in your efforts to achieve your business and personal goals.

Specifically, by taking this online farm business self-assessment,you will:

  • Learn about current farm management practices, systems, knowledge, and skills
  • Understand how effective planning can help you make good decisions
  • Set and prioritize your farm business goals in order of importance
  • Identify resources that can help meet these goals
  • Build on your farm business' strengths
  • Write an action plan to improve the profitability and success of your farm business

After the Online Assessment Tool, you, your family and staff (if you have them) will be able to clarify the plan and put it into practice so that it is useful as your business expands and changes.

Feel free to complete the Online Business Assessment on your own. Alternatively, you can complete the Assessment with members of the family and farm team. Or, other members of the family and farm team can complete the Online Business Assessment on their own, and the Assessments can be compared. Comparing Assessments can lead to positive discussions regarding the future of the farm and ensure everyone’s perspective is taken into account.

You are encouraged to come back and complete the Online Business Self-Assessment on an annual basis to help respond to changes within the agricultural industry and your farm business to ensure your plans reflect the accomplishments and changing needs of the farm.

By the end of the Online Assessment Tool, you will have an Action Plan to achieve your goals.

By submitting your Action Plan Summary to the Ontario Soil and Crop Improvement Association for validation, you may eligible for cost-share opportunities under Growing Forward 2.

Attend a Growing Your Farm Profits Workshop

The Growing Your Farm Profits workshop is a two-day free workshop that takes place in various locations around Ontario throughout the year. You will complete your Business Assessment and Action Plan in a group setting with a qualified instructor. Members of the family and farm team are welcome to join you in this workshop.

Take the Growing Your Farm Profits (GYFP) eLearning Course

With ever-growing to-do lists and schedules that seem to be filling by the minute, many farmers are finding that they simply don't have the time to attend workshops or in-person classes.

The Growing Your Farm Profits eLearning modules will provide you with the ability to learn at your own pace and on your own terms, providing you with the option to move to the next module when it is most convenient to you at a place of your choosing.

The Value of Planning

The Growing Your Farm Profits Online Business Assessment Tool will guide you in your efforts to achieve your business and personal goals by creating a practical plan that is flexible enough to fit your needs.

Planning is one of those tasks that, while you may not immediately see the benefits, will pay off over time - in profitability and peace of mind.

Going through the planning process helps you focus on what’s important and makes you think about the possibilities for growth as well as the potential risks to your operation.

Creating a plan means setting goals, figuring out the best ways to achieve them and finding the right resources and actions to get there. Most important, when you write it all down, you can show other people - your family, staff, lenders, business partners, advisors - what you envision for the future of your farm.

A baseline study commissioned by the Agri-food Management Institute in 2010 said that “there are two groups, Planners and Developers, who are most likely to be engaged in farm business planning and are also more likely to have reported increased sales over the past five years.”

Having a plan works on a number of levels. It:

  • Helps guide your business through the inevitable ups and downs that will happen
  • Keeps you on track if you check in once a quarter or every six months
  • Documents the way you want your farm operated, should you get sick or injured
  • Is essential if you ever need to engage lenders or investors
  • Brings a common vision and path to other people who are, or become, involved in your business

How to Plan

To make sure something gets done you must write down:

  • What you want to do
  • Why you are going to do it
  • When you are going to do it
  • How you are going to do it
  • Who is going to do it
  • How success will be measured

Some will come out of a planning process with a detailed plan for succession or expansion. Others might be more concerned about how to expand production, create a better work-life balance or restructure debt. Whether you do it yourself, or take your ideas to a farm business advisor, the plan has to fit with your own situation, needs and desires.

“No farming business can hope to achieve higher levels of success without the right approaches to managing capital, marketing, people, and relationships.”

~ Conference Board of Canada 2013 Report “Seeds for Success: Enhancing Canada’s Farming Enterprises”

The Online Business Assessment Tool provides the first step in the business planning process. Producers come away with a comprehensive assessment of their farm business practices, priorities, key goals and ultimately, an Action Plan as a starting point towards the farm’s business plan.

For additional information and assistance with business planning, visit Pledge to Plan(

Part 1 Assessing Where Your Farm is Now

The seven Business Assessment Areas below allow you to assess a variety of business aspects of your farm operation. Each business section contains an introduction and a glossary to help you answer that section’s self-assessment questions.

  1. Production Management
  2. Marketing
  3. Financial Management
  4. Human Resources
  5. Social Responsibility
  6. Succession Planning
  7. Business Goals

Each business area contains an introduction, business assessment questions, key contacts and helpful resources.

Remember, a glossary is available through the navigational menu to help you answer that section’s self-assessment questions.

Self-Assessment Questions

There are two steps to completing the self-assessment questions.Business Strengths Rating and Priority Rating. You can complete the Strengths Rating and Priority Rating at the same time for each question.

Step 1: Business Strengths Rating

Possible answers are provided for each question using a green, yellow, or red rating. Questions can address farm business practices (how things are done on the farm), or address farm business knowledge and management skills.

Pick the answer that best reflects the situation on your farm by clicking on the corresponding box: green, yellow or red.

  • A green response indicates that this best management practice happens on the farm.For farm business knowledge and skill type questions, a green response indicates that farm team members have the business knowledge/understanding and skills identified.Green responses indicate business strengths.
  • Yellow responses indicate some but not all of this best management practice happens on your farm or your farm team members have some but not all of the business knowledge/understanding and skills identified.Yellow responses indicate areas for improvement.
  • Red responses indicate that this best management practice does not happen on the farm.For farm business knowledge and skill type questions, a red response indicates that farm team members do not have the business knowledge/understanding and skills identified. Red responses indicate business weaknesses.
  • If the question does not apply to your business record it as Not Applicable (N/A)

Step 2: Priority Rating

After you have finished assessing the business strengths, assess each question as a high, medium or low priority for your farm.

Note: You can complete the Priority Rating at the same time as the Strength Rating for each question.

  • HIGH should be considered/monitored on a regular basis. It’s a key success factor to your business now and in the future.
  • MEDIUM is important but may not always be critical for ongoing success.
  • LOW has little to no impact on the success of your operation.

From the assessment questions, the High Priority Summary will become populated to help track your priorities and any unanswered questions. The High Priority Summary is accessible through the navigational menu at the bottom of the page.

Key Contacts and Reference Section

In addition to the assessment questions, each business section has a ‘My Key Contacts’ listing - a place to record the contact information of farm members and outside advisors responsible for this area of the farm business.

Finally, each business section contains a ‘Resources’ listing of further contacts and information.

Part 2 My Top Priorities

From the high priority strengths and weaknesses identified in your assessments worksheets you will select your top priorities to address.

Identifying opportunities and threats to your farm business also helps to identify top priorities to address.

Part 3 Setting Goals

You will identify up to five key goals for your farm based on:

  • Your top priorities
  • Opportunities and threats facing your farm
  • How your short-term goals support your long-term goals
  • Other business considerations

Part 4 Action Planning

The final step is to complete an Action Plan for your top three to five key goals. An action plan provides you with the goals and steps needed to make the changes you desire.

Part 5 Next Steps

Once your Action Plan is complete, you can download, print and email it.

By submitting your Action Plan Summary to the Ontario Soil and Crop Improvement Association for validation, you may eligible for cost-share opportunities under Growing Forward 2.

Additional information on Growing Forward 2 and cost-share funding is also available.

Business Assessment Areas

Production Management

Making and delivering your product or service efficiently and effectively to the market captures the profit opportunity for your business. The quality of your product attracts customers. Your production systems, facilities and equipment, and buying skills all affect the product quality, your yield, and the cost of production.

Four key components of production planning are:

1. Record, Measure, and Compare

You need to measure and compare if you want to improve your productivity. There are two ways to do this. Benchmarking against your own farm’s past performance helps you make improvements within your own operation and is key to meeting and surpassing your goals. Benchmarking against other farms points out areas where you could make improvements to your operation. You can benchmark production yields, quality, costs of production, and production margins.

The steps involved in benchmarking are:
  • Decide what the key information is that would help you make the best decisions regarding yields, quality, cost of production, and margins
  • Set up a record-keeping system that provides this key information in an accurate and timely way
  • Compare your records with previous years to track improvements within your operation
  • Where possible, compare your operation with other similar farm operations to look for areas to improve your production system
2. Focus on production activities for which customers will pay

Working smart is better than working hard, and making sure the work you’re doing pays off is important. First, ensure that your production activities meet regulations and are aligned with industry norms. Second, ask yourself if there are unnecessary steps in your production system that cost you money but do nothing for your customer. For example, could changing work patterns or streamlining inventory storage cut your costs? Whatever changes you make in terms of increasing quality or capturing new markets shouldn’t cost more than what you’ll make in increased revenues.

To evaluate your production system:
  • Make a list of what your customer values in the products or services your farm produces
  • Make a list of the steps you take in your production system
  • Identify how each step contributes to what the customer values
  • Look for ways to create greater value or the same value at less cost
  • Eliminate the steps (and their costs) that do not create true value
3. Adopt Technology

Adopting new technology to move your business forward can be a smart decision. Robotic dairy milking, GPS tracking systems and genomic testing for livestock are just a few of the many advances that farmers have taken on in the past few years.

Smartphones and tablets and a whole host of software packages and applications can give you instant access to production data so you can make better decisions for your farm. Many technological innovations save you time, increase productivity and boost profitability. But they need to fit your needs.

Adopting new technology can be expensive, so research is key. Whether you are an early adopter who likes to help researchers work out brand new technology, or a later adopter who likes to wait until all the bugs are worked out, the solution has to fit your business model. You want to ensure that you will be rewarded for your investment in technology with increased returns or reduced costs.

More than half the 500+ farmers surveyed in a 2014 study by the Canadian Federation of Independent Business said they would be adopting new innovative technologies and practices in the next three years.

Successful farmers:
  • Stay on top of innovation trends
  • Test the technology on their farms in ways that reduce the cost risk
  • Try something different each year (usually on a small scale basis)
  • Weigh all the costs and benefits
  • Adopt the technology in a way that gives the most advantage to the farm
4. Balance production with other business and life needs

In the farming business, there are never enough hours in the day to get all your production work done, so it is important to be as organized as possible.

Being organized means you can more fully participate in personal, family and community activities. It also means you can pay better attention to the other aspects of your business.

No one is perfect at everything, so if production is your passion, consider getting outside help for the areas of your business where you’re less skilled or comfortable. There are qualified professionals and organizations who can help with financials, managing people, and marketing.